Railways starts procuring cheaper power to the tune of 300 MW from Ratanagiri gas plant in Maharashtra.
The move to save Rs 600 crores annually for Central and Western Railways Zones.
Railways for the first time draw power under open access as Distribution licensees in any state.
The current initiative signifies Indian Railways’ march ahead on the path of achieving annual saving of Rs.3000 crores (Budget Target) in its energy bill.
In a significant move to reduce Railways energy bill, Indian Railways today started procuring 300 MW power from Ratnagiri Gas Power Ltd. (A Govt. owned gas based power plant in Maharashtra) for its traction power needs in Maharashtra region. This is for the first time that Railways are drawing power under open access as Distribution licensees in any state.
This Electric Power is almost Rs. 4 per units cheaper in comparison to the present tariff being paid by Railway in Maharashtra. The procurement of power from Ratnagiri Gas Power Ltd. will give a saving of about Rs 600 crores annually for Central and Western Railways both Railway Zones with headquarter in Mumbai. Railways have been allocated 500 MW power from Ratnagiri plant. The procurement of remaining 200 MW power will also be done soon which will be utilized for traction power needs in other states. The complete procurement of 500 MW in the coming days is expected to give a saving of about Rs.1000 crores annually. In this way, the financial saving will continue to increase in the coming days. This kind of initiative of saving energy cost by procuring power through open access as distribution licensee is in line with the Railway Minister Shri Suresh Prabhu’s mission to improve the Railway’s financial Health using innovative methods.
Background brief :-
One of the prime focus areas of the Minister of Railways, Shri Suresh Prabhakar Prabhu since he assumed the charge of Minister for Railways was to improve the financial health of Railways for which he adopted multi pronged strategy. Railway Minister targeted to reduce cost of the big ticket items like the energy bill of Railways which was about Rs.30,000 cores and he took up this as his mission area. This vision has been realized in a big way today when Indian Railways started drawing about 300 MW from Ratnagiri Gas Power Ltd. (A Govt. owned gas based power plant in Maharashtra).
Indian Railway had the status of deemed licensee as per the Electricity Act, 2003 which was further clarified by Ministry of Power in May, 2014. This proviso has been effectively used by Ministry of Railways today on 26th November, 2015 when about 300 MW power started flowing in Maharashtra. This is for the first time that Railways are drawing power under open access as Distribution licensees in any state.
At present Indian Railways electric traction bill is about Rs.10,600 crores and in the Budget Speech of 2015-16 it was envisaged that in the coming years this will be brought down by about Rs.3000 crores by procuring power at economical tariff from generating companies, power exchanges and through bilateral arrangements. This current procurement move fulfils this important Budget commitment to reduce the input cost to railways.
The entire move could fructify and all challenges could be overcome successfully due to continuous support and guidance of the Railway Minister Shri Suresh Prabhu. In this case CERC after looking into all aspects including the judgement of Hon’ble Supreme Court upheld Railways right to avail power directly under open access from the generators as per Electricity Act read with Railway Act.
At present high cost of electricity tariff being charged by Distribution companies makes electric traction costly. Payment of realistic electricity cost is important to Railways as this will make electric traction viable in many areas and will reduce the total energy bill of Railways. This in the coming days will tremendously improve the financial viabilities of Railways in a great way. If one takes into account the future expansions and high speed trains the saving will be much higher. This will also be beneficial from the climate point of view.
This is the first time Railways have been able to source power as licensee using the state transmission network (STU network) and therefore it becomes a classic example of co-operation of Central and State agencies.
Railway Minister has been working on multiple fronts to improve the financial health and to speed up growth of Railways. On one side, low interest rate institutional financing is being made available through funding from institutions like LIC etc. and on the other front, the input costs are also being brought down.
In addition to these steps, Railways have laid special emphasis on improving energy efficiency and have achieved savings of about 3% in Electric traction energy and about 5% in non traction. Because of various energy efficiency measures, a saving of about Rs.400 crores in the current year will be achieved. This will have cascading benefits as these initiatives will lead to savings year after year.
Railways are committed to contribute towards improvement of the environment. In this direction Railways are focusing on energy security and going for environmental friendly means of power generation keeping in line with the Hon’ble Prime Minister’s vision. Railways have recently completed work on 26 MW wind plant in Jaisalmer, which will take Indian Railway’s installed capacity on renewable energy front to 47 MW. It is just a beginning towards installation of targeted 1150 MW renewable energy (Solar and wind) plants by Indian Railways in the coming years.
Supplier selection in Indian Railways is based solely on the criterion of price and currently there is no scientific system for evaluation of supplier on the other very important criteria. The interesting part is that IR without formally entering into long term contracts, is in effect in long term contracts with most of its Part I suppliers without taking advantage of being one from the suppliers.
The areas of concern from supplier selection point of view are:
Although the Ministry has prescribed a Supplier Rating formula in 1997, but there is no such system in vogue. It is a fairly simple formula, where Quality Rating has been given 60% weightage and Delivery Rating 40% weightage. But even this formula is not complete and does not capture a very important aspect of service, assuming cost to be same.
There is a certain lack of objectivity in rating the supplier or selecting a new supplier which leads to complaints and can hamper even good decision makers to take a chance. As a result many times old non-performing suppliers are carried forward.
The suppliers are not formally made aware of their bad performance from all points of view and the recording system is not scientific. Each supplier is viewed in isolation. The suppliers are also not aware of each other’s performance.
From the study of these systems it was found that they do not employ very sophisticated systems, in fact even the well established Multi Criteria Decision Making techniques are not used. This analysis conveys the fact that criteria for supplier evaluation are more or less common. Some companies do have exhaustive and scientific methods to assess the performance. They have formal feedback systems also. The four factors namely, quality, delivery, price and service are the criteria for assessing supplier performance by most of the organizations. The Bureau of Indian Standards, New Delhi has issued a comprehensive standard IS 12040:2001 on “Guidelines for development of Supplier Rating System”. The purpose was to give guidelines to organizations in India on methodology for supplier rating.
System factor of the IS specification has been avoided as it again leads to subjectivity; moreover we are trying to devise a method for rating the existing supplier, who has already been in business with IR. The principle adopted is “You can’t manage what you don’t measure”.
Taking cue from what happens in PU in tenders, we find that an open tender is issued for all items with a rider that only Part I suppliers will be given full order with some part being shelved to Part II sources if the need arises. This tender principle is perhaps adopted so that new suppliers are also found. But this is an unscientific method, as the focus of Tender committee is fulfilling the immediate requirement of material and NOT TO DEVELOP A SOURCE. These have to be two different tenders/ request for proposal and handled by different set of officers/managers.
Thus SUPPLIER EVALUATION and SUPPLIER CAPABILITY ASSESSMENT have to be separated.
Supplier Evaluation System
We can define target values of loss due to non conformity of supplier to our requirement.
The supplier should be made aware of his rating on a continual basis, in fact other suppliers should also be allowed to see the continuous ratings. With advent of web based systems this can very easily be accomplished.
The important point here is how to quantify each criterion. There is a method known as Taguchi Loss function (Taguchi et al. 2004) in Quality engineering, which is used for measuring loss to society due to non-conformance. It may however seem very complex to the manager and therefore become unacceptable in the managerial context of supplier evaluation. But it is worth considering as it is probably the most widely accepted technique for quantifying loss in engineering and science experimentation. The Taguchi loss function defines specification limits beyond which product is not accepted and loss is 100% to society.
0 Comments